Verizon will broaden its copper-to-fiber conversion in 2013

January 8, 2013 | By Sean Buckley

Verizon (NYSE: VZ) on Monday reaffirmed plans to accelerate the migration of customers on its copper facilities to fiber in 2013.

McAdam (Image source: Verizon)

Lowell McAdam, Verizon's CEO and chairman, said during the Citi Global Internet, Media & Communications Conference in Las Vegas they will make conversions in areas that have a high level maintenance issues.

"So where we have focused first, just to prove in the concepts and get the process right, is where we have high maintenance areas and we have FiOS and copper going down the street," he said.

Although he would not reveal an exact timeline or how many customers it would migrate to fiber this year, McAdam did say that in addition to targeting individual "chronic copper" customers--or those that have more than two truck rolls to service the copper line during a six-month period--Verizon plans "to target broader areas."

McAdam added that what this means is "even though an individual customer may not have a maintenance problem, if that area has a maintenance problem we will cut them over."

One event that drove Verizon to accelerate its copper-to-fiber migration program in 2012 was Hurricane Sandy. With much of its copper facilities damaged beyond repair in both New York City's Broad Street area and areas of New Jersey such as the Barrier Islands, the service provider decided the best route was just to replace it with fiber.

"When we had the impact of Sandy our mantra was you will not fix copper," McAdam said. "So if copper got into any kind of a damaged situation and FiOS was in the vicinity, or we could run FiOS down an adjacent street and get into there, we would cut the copper out of service."

Overall, Verizon converted about 200,000 customers to fiber in 2012, but that number might be a bit higher due to the impact of Hurricane Sandy. Looking forward, the telco will expand the program to more areas this year.

"We don't have all that documented at this point because there is obviously still a lot of rebuilding going on in New Jersey and parts of New York, but we will kick that up substantially in 2013," McAdam said.

McAdam reiterated that the conversion to the FTTP-based FiOS service has two advantages: immediate service upsell opportunities, and lower maintenance costs.

FiOS has become a growing cash cow in the telco's wireline business. In Q3 2012, the telco added 136,000 FiOS Internet connections for a year-over-year increase of 14.4 percent, while FiOS video subscribers rose 15 percent by 119,000.

"Well, when a customer goes, even to FiOS digital voice, they very quickly see the difference on copper and we have seen the ability to sell up," he said. "Then on the maintenance side a huge difference for us. We can lower our cost structure dramatically by getting more onto the FiOS platform and get off the old copper."

Despite the advantages of lower maintenance costs and potential upsell opportunities, not everyone is excited about the copper to fiber transition. A group of six New York City landlords where copper is damaged won't let Verizon install fiber in their buildings.

These landlords claim that some tenants and residents who reside in the buildings want to keep their copper-based DSL and PSTN services. It's possible that that the protests are coming from older residents whose main concern is having nothing more than a traditional phone line.

The telco is not taking the protests lying down. Verizon has filed a complaint with the New York Public Service Commission in which it argues that the landlords are preventing "restoring telephone service to the tenants of those buildings."

As Verizon looks to convert copper to fiber in other cities outside of New York City, it will likely face other battles from CLECs that depend on last mile facilities from the large incumbent operators to deliver Ethernet over Copper (EoC) services to their business customers.